VC funding in healthcare IT at Rs 4,495 cr in Q3: Mercom Capital

Mercom Capital Group, llc, a global consulting firm, today released its report on funding, mergers and acquisitions (M&A) activity in the Healthcare Information Technology (IT) sector for the third quarter of 2013.        

 

Venture capital (VC) funding in the sector continued to rise in yet another quarter with Rs 4,495.70 crore ($737 million) raised in 151 deals. The dollar amount of disclosed deals surpassed the second quarter total of Rs 3,800.30 crore ($623 million). Year-to-date, the Healthcare IT sector has raised a disclosed Rs 11,285 crore ($1.85 billion).

 

While the 2009 HITECH Act helped launch the sector through its Rs 10,3700 crore ($17 billion) allocation towards the adoption of meaningful use of healthcare IT, private investments into the sector have continued to rise with increasing EHR (electronic health record) adoption. Release of healthcare data by the US Department of Health and Human Services has also contributed to the growth of healthcare products and applications focused on consumers.

 

“Funding into Healthcare IT is on pace to double over last year,” said Raj Prabhu, CEO of Mercom Capital Group. “With major parts of the Affordable Care Act on the horizon, the focus is on health insurance exchanges, preventative care, wellness, population health, and a general shift from quantity to quality of care, which is reflected in this quarter’s funding transactions.” 

 

Healthcare practice-focused technology companies received Rs 2,982.90 crore ($489 million) in 59 deals with population health, EHR/EMR, practice management, and data analytics companies all receiving attention this quarter. 

 

Consumer-focused companies received Rs 1,512.80 crore ($248 million) in 92 deals, with most funding ($161 million = Rs 982.10 crore) going to the mobile health category, with mobile health apps and sensors receiving the most funding this quarter. 

 

The top VC funding deal in Q32013 went to Evolent Health, a population health management organization that integrates technology, tools and services to support value-based care and payment models, which raised Rs 610 crore ($100 million) from The Advisory Board Company, UPMC Health Plan and TPG Growth. 

 

Other top deals in the quarter included Practice Fusion, a free web-based EMR provider, which raised Rs 427 crore ($70 million) from Kleiner Perkins Caufield & Byers, OrbiMed Advisors, Deerfield Management Company, Industry Ventures, Artis Ventures, Morgenthaler Ventures, Felicis Ventures, Glynn Capital Management, Band of Angels Acorn Fund, H Barton Co-Invest Fund, and Goldcrest Investments; MedSynergies, a provider of revenue and performance management solutions for healthcare providers, raised Rs 396.50 crore ($65 million) from undisclosed investors; Fitbit, a fitness and health tracker company, raised Rs 262.30 crore ($43 million) in private equity financing from Qualcomm Ventures, SAP Ventures, SoftBank Capital, Foundry Group and True Ventures; and Oscar, a technology-based health insurance and telemedicine provider, raised Rs 244 crore ($40 million) from Thrive, Founders Fund, General Catalyst, and Khosla Ventures. 

 

There were a total of 168 investors in Q32013, including VCs, accelerators, incubators and crowdfunding platforms, compared to 161 investors in Q22013. Six investors participated in multiple funding rounds compared to eleven in Q2 2013. Kleiner Perkins Caufield & Byers and The Social+Capital Partnership were the most active investors and participated in four deals each. The remaining top investors participated in three deals apiece. They included FirstMark Capital, Founders Fund, HLM Venture Partners and Khosla Ventures. 

 

Mergers and acquisitions (M&A) in Healthcare IT totaled Rs 6,710 crore ($1.1 billion) in 45 transactions. Last quarter saw Rs 658.80 crore ($108 million) in 30 transactions. The most active categories for M&A transactions included Revenue Cycle Management with nine, followed by Practice Management with eight, and Telehealth with four transactions. 

 

There were only six disclosed M&A transactions in the third quarter, including the Rs 3,928.40 crore ($644 million) merger of Greenway Medical Technologies, a provider of an EHR, practice management and interoperability solution platform, and Vitera Healthcare Solutions, an EHR and practice management software provider; the Rs 1,220 crore ($200 million) acquisition of Medical Management Professionals, a medical billing and practice management company (subsidiary CBIZ), by Zotec Partners; and the Rs 1,220 crore ($200 million) acquisition of Cardiocom, a developer and provider of integrated telehealth and remote patient-monitoring services, by Medtronic. The Advisory Board Company acquired Medical Referral Source, a web-based software program that streamlines patient referrals from primary-care doctors to specialists, for Rs 70.15 crore ($11.5 million); and IMS Health acquired Diversinet, a provider of secure, patented mobile technologies and connected health solutions for healthcare organizations and partners,for Rs 21.35 crore ($3.5 million). Also in Q3, Mastech Holdings’ Healthcare Unit was acquired by Accountable Healthcare Staffing for Rs 7.02 crore ($1.15 million).

 

There were a total of 412 companies and investors mentioned in this report.